There is a New plan by the Federal Reserve for them to test banks’ ability to survive. They have a stress test criteria and they will be releasing the full results Thursday afternoon at 4:30 ET. This is a worst scenario test.
They will looking at how the nation's 19 largest banks possibly survive a world of jobless rates over 12% and stock prices dropping 50% , with a 20+% home prices decrease.
The Feds usually conduct this test on banks every year, but have not been been releasing the results of their worthiness since 2009 when they found billions of insufficient funds on the banks balance sheets. They are supposed to have enough cash and securities to withstand a catastrophic loss in a financial crisis. I am sure they kept us in the dark because they didn’t want to scare us anymore than we already are. They are releasing this information for the first time in 4 years. These tests are designed to detect their ability to survive. The Fed can stop banks from paying stock dividends or buying back their own stock if they fail the test.
The Fed wants banks to be strong enough to keep lending money to Americans and businesses. Lets hope that they are strong, can pay back all of the money WE loaned them with interest, and stand alone again
The Banks that did not pass the test of the top 19 banks were Citigroup, Ally Financial, MetLife, Sun Trust Bank. They will have to work harder. But this test is not a guarantee that all the ones that did pass will be able to with stand another financial Shock. Let’s hope we all work smart from now on.
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